2016 (9) TMI 342 - AAR - Income Tax

TDS u/s 195 - Whether the Settlement Amount payable pursuant to the Settlement Agreement to Aberdeen Asset Management PLC, United Kingdom ( Aderdeen ), will be regarded as sum chargeable to tax under the provisions of the Act, as referred to under Section 195 thereof? - Held that - As relying on the ruling pronounced in In Re Aberdeen Claims Administration Inc. and Aberdeen Asset Management Plc. 2016 (1) TMI 793 - THE AUTHORITY FOR ADVANCE RULINGS NEW DELHI wherein concluded that the settlement amount received by Aberdeen investors is not taxable under the provisions of the Income-tax Act

Summary

Issues:
1. Taxability of settlement amount under section 195 of the Act.
2. Rate and stage of income tax deduction under section 195.

Analysis:
1. The primary issue in this case pertains to the taxability of the settlement amount along with any supplemental consideration payable pursuant to the Aberdeen Settlement Agreement under section 195 of the Act. The applicant sought clarification on whether such amounts would be chargeable to tax. The Authority referred to a previous ruling where similar questions were addressed, and it was held in favor of the applicant against the Department of Revenue. The Authority reiterated that the same ruling would apply in this case as well, leading to a negative answer regarding the taxability of the settlement amount.

2. The second issue raised by the applicant was regarding the rate and stage of income tax deduction under section 195 of the Act if the settlement amount was deemed chargeable to tax. The Authority, based on the earlier ruling, concluded that since the taxability itself was negated, there was no requirement for the applicant to deduct income tax at any stage or at any rate concerning the remittance to or from the Escrow Account to Aberdeen. Therefore, the question of the rate and stage of income tax deduction did not arise due to the non-taxability of the settlement amount as per the provisions of the Act.

In conclusion, the Authority for Advance Rulings, New Delhi, addressed the issues raised by the applicant regarding the taxability of the settlement amount under section 195 of the Act and the related aspects of income tax deduction rate and stage. The judgment was based on a previous ruling that favored the applicant, resulting in a negative answer regarding the taxability of the settlement amount. Consequently, the Authority determined that there was no requirement for income tax deduction at any stage or rate concerning the remittance of the settlement amount, as it was not chargeable to tax as per the provisions of the Act.